Transcript for:
Effective Macroeconomics Exam Preparation

[Music] hey Eon students this is Jacob Clifford I'm here you're here this is it I'm I am super excited and super proud of you for all the hard work you've been doing uh we're going to spend about an hour maybe an hour and a half I'll hang out as long as you need me to uh to do some review the night before the big exam I hope you did well on your micro exam if you took that test it's time to switch over your brain to macroeconomics here we go I'm so excited I can see you guys in the comments uh I can see people already saying uh you know what's up I'll take that uh you know Clifford take the test for me I can't do that I guess I could but there's there's you have to pay me a lot of money um I'm going to go over relationships you're already ahead of me great I love it a shout out right do different shout outs to different people look at you guys these are coming in so fast I'm I'm having a hard time getting them all but uh we're gonna talk about all these things guys we're gonna talk all these things and we're g to cover some key Concepts here's how it's going to work today though okay the way it's going to work is we're g to start big and then move into smaller Concepts because there's people right now who are like here just explain to me the reserve Market if this happens this like okay we're going to get to those details you're trying to get a five that's awesome I'm GNA help you I promise but right now let's focus on the big Concepts and we'll move smaller and smaller and by the end we'll do it by unit by unit I'll answer your specific uh questions you know what someone just said micro was easy your darn right it was um my predictions were off uh a little bit but uh that's okay I actually saw your free responses for micro and uh I'm going to make a video that's going to cover those answers soon so your tests tomorrow watch another video on micro enough of that though let's get ready for your test for macroeconomics ladies and gentlemen here we go last minute review here we go so first things first um I I'm gonna boil the down the test to four things so if you can if you look at every question every single one of the questions boils down to four things and for macro it's actually easier macro in my opinion is actually easier than microeconomics in many ways the four things it boils down to is definitions so do know the definition of this concept if you know the definition cool right do you know what uh loanable funds is like that's more of a graph too but do you know that crowding out if I say the word crowding out do you know what that means do do you have a picture of what it might look like on the loable funds Market graph do you do you understand these Concepts then there's the actual graphs themselves and the things that shift those graphs then there's relationships ah macroeconomics is all about relationships I'll talk more about it in a second and the last one is those equations which equations do you need to know I'm going to cover that give you all the details and help you guys out that's the plan for the first half of this review session focus on these big Ideas I'll do most of the talking not really looking at your comments yet but then I'll go through unit through unit through unit and we'll find out uh what questions you have and give you guys some shoutouts and help you out that said let's start this off with the definitions as I go through these keep in mind you don't need to know them all you're not trying to get 100% on this exam you're trying to get the big Concepts first so as I'm going through these Ral note there's one I got to go back and look at that I don't I don't know that is my teacher didn't teach it we ran out time so here are some what I did is this I I took the test over again and I sat down I said okay what are the definitions that students need to know I'm not talking about like Agate demand you know AG demand you know GDP I'm not saying that stuff I'm saying like this question here's a definition of a word if you didn't know that word you'd kind of be screwed first one is obviously the most important concept especially when it comes to monetary policy is investment investment is always business spending on machines tools and factories it's never personal investing human capital is is investment right investment except it's in yourself it's in it's in skills and education making workers smarter and more productive obviously GDP what's included and not included is kind of a definition idea the type of unemployment frictional structural and cyclical the idea of sticky wages so this is the idea that uh that when there's a recession wages can go up quickly right when there's inflation but when there's a recession wages have a tendency um to be sticky um they don't go down they're not very flexible downwards um they don't really use that term I actually I've seen that term on the test but stagflation is an important one you're going to see that concept I've seen questions where it's like which of the following would cause stagflation that's a perfect example cost push and demand pull inflation cost pull C push is when Supply shift to Left Right aurate Supply shifts to the left we have inflation and then demand pull is when demand shifts to the right and we have higher inflation know the difference between fiscal and monetary policy just the definitions not the graphs yet I'm just talking about definition you'll see questions where it says which of the following is a fiscal policy that could be used to get out of a recession and then they'll give you a bunch of monetary policy junk in there you're like okay that's monetary policy that's wrong you want to look at the fiscal policy questions velocity of money there that was one that said um the velocity money is which of the following it just a straight definition on the test the loss of money is how much times money is spent in reent over time so that $20 in your pocket has been spent by somebody else so in a year's time how many times has that $20 been spent and that's part of something called the quantity theory of money I'll talk about later when I talk about the money supply you should know definitions like what's M1 or M2 money supply I've seen questions on that even though that changed in real life recently so I probably you probably won't see questions on that now but the idea that money in the money supply is not just cash right it's money in checking accounts as well real versus nominal interest rates understand debt and deficits what's crowding out I'll stop right now crowding out you got got to know what crowding out is they love this on the test it's the idea that defit suspending leads to higher real interest rates so when the government does all the borrowing it leaves less money in the private sector for private businesses to borrow that causes interest rates go up and that might slow down the economy that's the idea of crowding out balance of trade this is the concept you learned in the last unit unit six your teacher was running out of time at that point in most cases but basically you got to know the two types of accounts the current account and the capital and Financial account which is this idea balance of payments so balance of trade is just an exports balance of payments is this idea that I'm talking about again I can talk about it when we get to unit six specific review so wait on that but for now just understand there are going to be some definitions that you're going to see and you're need to know to answer certain multiple choice questions you got to know what loanable what crowding out is to answer this question or what stagflation is or cost push instead of talking about Theory because theory is good like okay what does that mean let me show you exactly what I'm talking about this is a question from the 2019 multiple choice questions uh from the test this believe it or not I don't know how but only 62% of the students got this one correct this is an easy question this is one of those definition questions you should just boom automatically get right I'll give you guys a few seconds to take a look at it okay here we go which of the following is an example of frictional unemployment you'll see I promise you tomorrow you're going to see one of these it'll say frictional structural or cyclical or it'll make a question about natural of unemployment but you know all these Concepts the answer to this one well first one volunteer work a that's out volunteer work doesn't count uh as employed or unemployed factory worker who lost their job because of recession that's cyclical unemployment that's wrong c a college student working a part-time job no part-time job is considered fully employed so they're not unemployed at all so C's wrong college graduate interviewing for two available positions the answer is d d was right e was an example of structural unemployment so again these are easy questions you just got to know a difference between frictional structural and cyclical frictional is between jobs like this college graduate the structural is machines do it better and cyclical is because there's a recession there's something pulling the economy down and therefore people lost their jobs that is an example of a definition question you're not going to see a lot of them like this this is not like all over the test but you are going to need some definitions let me give you guys another one take a look at this one referring to cost pole inflation try this one on your own all right good luck there's a few guys of you or girls spamming the uh the the the comments please don't do that if that's okay we're trying to learn you're here with us here we go which of the following will Mo most likely to cost push inflation so first of all you have to understand what cost push inflation is right this is like I said earlier short rag Supply shifting to left so price level goes up and unemployment goes up right it's the worst case scenario so worst thing in the economy is to have inflation and higher unemployment so which one of these things would lead to it now it's not telling you um if it's know an increase in which of the following they might do that too this one's just saying which one a decrease in labor productivity there's your answer the answer is a if workers are less productive that means we're going to produce less stuff and that's going to cause the the accurate Supply shift to the left price level goes up quantity goes down and more unemployment a decrease in income taxes no that would shift aggate demand and lead to more inflation but that's demand pull inflation right there's cost push and there's demand pull so that question depends right so for B would be the right answer a decrease in income taxes would cause inflation because consumers would have more money they'd spend more money there'd be more disposable income but that's not what we're looking for with the definition you understand what I'm trying to show you I'm trying to show you the definitions matter so make sure you know those key definitions I just gave you all right that said let's talk about those graphs there are six boom six key graphs that you need to know do you know them let me know in the comments right now put them in there six key graphs that are going to be on your test there is a chance they might put in a seventh and I'll talk about that in a second but really when it comes to free responses there's only six graphs that you could be drawing and then the actual test I looked through a couple of them recently and I realized very rarely unlike micro very rarely are they putting graphs in the actual multiple choice sections they're referring to graphs like if you know the graph in your head you got the right answer but they don't really draw the graph that often so some people are saying production possibilities curve there's a Phillips curve foreign exchange Agri demand Supply you're doing good the money market you're almost getting all of them you almost got all of them getting close Okay the right answers in order of when you learn them is the production possibly is curved this is the easiest graph in the world you know this graph they've had questions where said draw production possibly as curve showing capital goods and consumer goods and then show a point that's a recessionary gap show a point inside the curve you're also going to see I guarantee Agri demand Supply on one of the free responses usually the first one you have to draw it when the economy is in one of three places remember this economy can only be in three places it can be at full employment a negative output Gap or it can have a positive output Gap next one you're going to see is the Phillips curve actually didn't learn it in this order but that's okay Phillips curve is another one that shows you where the economy is it can show those three things Again full employment negative output Gap positive output Gap and then there's the money market which is a policy graph that shows you what happens when the when the Central Bank increases or decreases the money supply the loanable funds Market which looks at lending and borrowing in the economy and the last one's foreign exchange this is the idea of another country's currency and people either demand another country's currency or they demand less or more Supply less Supply more those are the six key graphs you need to know now that said they're not going to have that many like I said in the most choice but you still need them so let me give you a specific example here it is let's try this one by the way 85% of students got this right you have to get this right you have to get this right here we go short run Phillips curve you got it now this is an example of actually kind of a relationship too but in the short run the Philips curve implies there is a tradeoff between C inflation and unemployment you know that because you can label the graph right if I ask you to draw the fils curve you draw inflation on the y- axis unemployment not employment unemployment on the x-axis by the way something little trick for you watch out for this the AP test likes to be tricky sometimes so this is not part of this but I'm just going to tell this you have to be careful when they say employment there's times you'll see questions where they be like okay what'll happen to price level and employment and because you're going fast because you're nervous and you're just trying to get the test done you'll see that and read unemployment you'll actually in your brain see unemployment then get the question wrong so watch out for that that's one of the tricky things they do but the price level and employment right so not unemployment be careful with that the answer we just said was C that was right all right now watch this let's try another one okay notice I'm not giving you a graph but if you know the graph boom you got the right answer good luck here we go in five 4 3 2 1 first thing I want you to notice is 63% of the students got this one right this should be like 83 so I don't know why students are missing these questions and if you did it's okay you've got time to study and review but for this one if I said a negative aurate Supply or negative aggate Supply shock you should be able to draw that graph when in doubt draw it out so draw that show accurate Supply shifting to the left your graph you look at it it's going to say price level goes up and the quantity went down right this is the idea of stag flation the question doesn't say stagflation but if you thought stagflation do me a favor right now thumbs up this video if you thought when you read this when you read this you thought stagflation like that word just popped in your brain if it did then you understand these Concepts you're going to do well on the test already I can tell you that because you're understanding that graphs and concepts are all related to each other so this one the answer is e at increase in both the price level and the unemployment rate so quantity fell so unemployment went up this is the thing I mentioned earlier the worst case scenario in the economy you've got to be getting that question right okay hopefully you did um but that's an example of the graphs again they didn't give you the graph and you are going to have to draw the graphs from the fear response but this question if you know the graph boom you got the right answer you should have seen this in fact do me a favor right now say I did put the I I did if you drew that graph right now in the comments right now let me know if you drew that graph to get that right answer say I did first person that does it uh I'm going to pull up your comments oh oh yeah I just missed you William there you go good job William you're paying attention shout out to your mom your mom okay other people they did I did yeah look at you popping up you're on Mr Clifford's YouTube channel look there's so many of you there's so many of you I can't keep I can't keep up I can't keep up there's oh my gosh holy anyways you got it perfect if you did and I mean this I'm I'm I'm not trying to blow smoke I want you to have confidence when you start seeing graphs like that right and you start seeing the graph that's like the Matrix you like start seeing the graph and the concepts are like oh this is all the related Concepts and I say crowding out you go oh that's like loable phones Supply Shifting the left like you're going to do well on this test I promise you all right that said let's move on let's talk and show you the graphs I I mentioned them but let's show them really quick the production possibly curve again they'll have you draw that usually they'll say you know identify a point that is uh unemployment or the idea of or high unemployment cyclical unemployment re recessionary Gap so a point in the curve Agri demand Supply is the most important graph you got to be able to draw it of course the Phillips curve shows you where the economy is as well so those three those three graphs all show you where the economy is the other one that does as well is called the business cycle um but the business cycle is not a graph they have you draw on the test very often it was on the 2019 multiple choice they actually gave you a question and Drew the business cycle but it's not like something you'll ever draw next is the money market graph this doesn't show you where the economy is but it does show you how changes in money supply affect interest rates and interest rates affect the overall economy the loanable funds Market the supply and demand for loans um it's kind of like the money market right it's different though because we're looking at the demand supply for people lending and borrowing and the last one's foreign exchange which is just a good oldfashioned X it's just supply and demand over again except supply and demand for currency like another country's currency so again six key grass need to know but there might be one more there might be a small chance they ask you about the reserve Market the good news is this I made a video it's about two years old that covers the Reserve Market because they added it to the AP curriculum about two years ago but I made another video I just made it today this morning and and posted it uh was it yesterday no it was yesterday I was I was I was thinking you know what I they got they need help on this Reserve market so I made this analogy about blood this is the graph I don't think and don't don't yell at me if I'm wrong but I don't think you're gonna have to draw this here's my argument why really quick the College Board knows this is not in your textbook because this is relatively new so they're going to ease into this like for example if if free response number two this year was all the reserve Market graph then kids you be like wait a second my teacher never taught me this it's not my textbook how am I supposed to know this stuff so I think they're going to ease into it if they ask anything it'll be a small part of the question they might give you the graph and then once they do that it tells the teachers it tells us oh we got to make sure to draw this and here's the labeling the College Board wants us to use basically the College Board is trying to put you in a situation that's fair and it would be in my opinion unfair just give you a huge question that's all the reserve Market with uh relatively new content that us as teachers haven't seen free responses with yet so I don't think it's going to be on there if it is it'll be a small thing it's more important to know those general concepts go watch that video The Reserve Market AP exam cram I that video it really does explain it well it explains the idea and that's what you need to answer the multiple choice questions and if the free response comes up the idea is important not just the graph all right that said let's talk about relationship say a relationships can you Hearts can you do imagis I don't know if you can I say Emoji Emoji oh I did let me take that off okay that was weird um what I'm trying to someone said um you guys are so you're commenting so fast I just can't get to it I'm gonna keep going I'm Gonna Keep Going let's talk about relationships okay um first of all let me tell you what I mean by relationships it's been like like 10 years ago I was sitting down and I was looking at multiple choice questions and it just hit me over time I said you know what this this class this whole class this whole course is just a big cause and effect if discount rate Falls what happens to the money supply right if price level goes up what happens to the real interest rate it's just this causes that this causes that and kind of a bunch of graphs and some definitions relationships are the most important thing that's why go relationships relationships are huge knowing those key relationships now in the ultimate review packet I have a cheat sheet where I have a list of all those it's super important that you sit down and you know the key relationships so I'm going to cover some of them before I do let me show you a multiple choice that gives you an example of what I'm talking about here it is try this one good luck 70% of students got this right so this is an easier one my bad sorry can't talk right now in a live review session not sure why Ryan was up there but cool man got people different guesses Aaron Smith is in the house all right here we go the right answer is C human capital yes human capital is correct if there's more this is also a definition question this is where definition meets relationship so more human capital more experience more knowledge more education that would lead to more economic growth but notice it's definition plus relationship you got know the definition of human capital but you got to know how human capital affects growth if you know that you got the answer that's what I mean by relationships let me give you another example that was an easy one let's try a little harder one here we go good luck on this all right shout out to Mr trust can't do too many shout outs right now we're almost to that point though okay here we go assume a country's government increases taxes in the Central Bank decreases the money supply the actions result in increase in which of the following okay so now you've got two separate things happening first a country's government increases taxes increasing taxes means people have less disposable income they're going to spend less so Agri demand's going to fall so in your brain say Agri demand is going to go down so you might put a as a right answer AG demand but no the question says it's going to cause an increase in which of the following so one of these is going to go up which one it's not AG demand AG demand is goingon to fall at least with this first shift the second shift if the government or the Central Bank decreases the money supply decreasing the money supply is going to increase the nominal interest rate right this is contractionary monetary policy that's also going to decrease Agri demand so both these policies one's fiscal one's monetary and they're both decreasing AG demand what's going to increase the answer is D unemployment unemployment is going to increase right because it's asking what's going to increase inflation's not I saw someone put e inflation's not going to increase right because AG demand's falling AGG demand falling price level goes down so really this is actually really this is graphs and relationships the previous question was uh definitions in relationship ship this one is the graph and relationship if you know the graph and you understand the relationship you get the right answer but that's what I'm mean by relationships understanding that just knowing that Central Bank decreased the money supply what does that do right if you knew that then you're gonna get that right answer let me give you one more this is a harder question only 43% of the students got this one right by the way back up let me know in the comments right now this last one with uh number 35 did you get it right so so I got it right put that in the comments I got it right if you got it right uh hello guy said I'm so cooked okay but uh for this one let me know let me know if you got this one correct the reason I'm doing this by the way is if you all told me it was all wrong like every one of you missed it then I'm obviously going too fast and I'm going fast on purpose because remember I'm not trying to jump into specifics right now I'm doing General stuff I'm showing you bigger ideas all right you guys got it right good amount of people Perfect all right new question here you go good luck only 43 so Less in theory less than half of you are going to get this right but let's find out good luck here we go in five four three two one now the reason why so few students get these ones right is because this is the last unit foreign exchange and it's usually something your teachers like rushing through um and and quite frankly you know the only videos I really have on in the ultimate review packet in unit six I talk about the four shifters of Foreign Exchange but you do need to know those shifters and know these Concepts the right answer is a an increase in the country's price level so if there's more inflation in a country people are going to buy less of that country's stuff because I mean see if I live in San Diego right if Mexico has super high in inflation then I'm going to buy less stuff from Mexico because I don't want to play higher prices for things so I need less Mexican pesos demand would go down for pesos that means the pesos is going to depreciate now you could also notice that it be an increase in the country's real interest rate when real interest rates goes up like that means people put more money so if I can go buy a bond if I can go drive across the border 30 minutes from now and go buy uh a bond from Mexico from the you know Mexican Treasury and it's like 50% and there's very low interest and I get r or very low uh inflation and I get 50% of my return I'm gonna go buy more of those I want more dollars or more pesos right so a b is the wrong answer the the B is wrong and because you also understand e is related to B right a decrease in the country's money supply would lead to a higher interest rate so those are both kind of talking the same thing a decrease in the country's expected inflation no if you think they're going to have less inflation that's not going to do it either so and and a decrease in the country's GDP um no so long story short the right answer is a this is an example of this concept of relationships but this is a harder question all right let's keep moving forward again here are those key relationships these relationships are the ones you need to know more than any of them a change in interest rates affects investment how do taxes affect disposable income how does government spending affect GDP national income so these are all Concepts that you need to know again this is pulled from the ultimate review packet um I don't have time to go through each one of these and it's going to slow us down and you probably have the ultimate review packet anyways but you you do need to know these key relationships this causes this this causes this this causes this if you want to come back to this you can here's the right answers for that these are the most important ones let's talk about that real quick let's just focus on these higher interest rates means less investment right if interest rates go up businesses are going to spend less on machines tools and factories for Capital stock is a term they'll use Capital stock is machines tools and factories that means more growth money supply lowers interest rates increase in the money supply lowers interest rates that's just monetary policy and that last one there's a relationship you need in unit six if you get nothing else just nothing else there's a relationship you need in unit six which is when the uh the value of the dollar when the currency appreciates when the when a currency appreciates people are gonna buy less of their stuff net exports Falls right so dollar goes up people buy less American stuff because the dollar appreciated those are the key relationships you need to know all right so last one key equations key equations need know here we there boom boom boom boom boom do you know these equations let's do them again first spending multiplier one over the marginal propensity to consume the money multiplier one over the reserve requirement you practice the crap out of these things you are going to need them they're easy equations remember part of the spending multiplier I don't have it on here is also the tax multiplier it's always one less than the spending multiplier watch my video where I talk about the multiplier effect if you have questions on that and want to practice real interest rate real interest rate is the nominal interest rate minus inflation um it's that's it's it's an easy concept and there'll be sometimes a question that'll be really simple right if if you're taking out a loan and you know you you took out the loan at 5% nominal interest rate but there's 3% inflation then the actual rate you're returning or the rate you're actually paying adjusted for inflation is only 2% right so that's the idea of real interest rate the unemployment rate uh equation you know as well number of people un employed divided by the people in the labor force times 100 the CPI is one you have to do and the GDP deflator I've got videos that cover those in details also make sure you can do opportunity cost so one plane costs how many trucks given up sort of stuff for unit one and the idea of comparative advantage and um last year they asked a question I think they'll this year as well my prediction is they'll have a GDP question where they'll say okay here's some products um calculate the GDP you know there's this many TVs and this is the price of TVs in this year there's this many TV and this is the price of DVS in this next year you have to calculate nominal or real GDP so feel comfortable with those equations all right that said let's practice an equation question a real easy one I think I mean I thought this was easy but only 60% of St gu right why why I don't know I can't believe it I don't know all right you're on your own on this one good luck okay so um real quick let me go back for a second somebody uh I saw in the comments someone's like oh most important equation is C plus I plus G Plus xn yes it is but that's not like an equation you're going to forget you know what I'm saying that's like that's not something like you're to look at the AP test the right when you walk in what's C plus I plus G you already know that equation you know that concept it's more of a concept than anything GDP is consumer spending investment business spending or government spending and net exports so that's not the kind of equations I'm talking about but yes that is the most important one and any change in those affects aggate demand and GDP for this one the right answer is a yes it is a you needed to figure out the marginal propensity to save was given so the the spending multiplier is one over 0.25 which is four so the multiplier is four anything spent will get multiplied times four so 15 Time 4 is 60 the answer is a that's the right answer for this again I don't know how on Earth only 60% of students got that one right it should be more than that it's not going to be you're not gonna get that wrong you're gonna get this one right all right that's an example of equations if you need more help with this there's an equations practice sheet that I created so some students the equations are easy like this is the last thing I'm going to practice and some students are like this is the part of everything that that I just struggle with so why I have GDP CPI equations this is all in the ultimate review packet as well it's a key equations practice sheet I actually have a video that goes over the answers I have a video that gives you the equations so make sure to watch that if nothing else that's on free here on YouTube and of course the practice sheet you can sit down do those different calculations if you do all those they're not going to ask you anything that's not uh in somewhere inside that you're going to be fine okay again let's boil it down one more time there are four things every question is one of these four sometimes combining them definitions graphs relationships and then equations if you know these you got it in fact here's the list let's do a self assessment I did this for micro and a lot of people said it was helpful so here we go can you do these things that's what I'm gonna ask can you do these things make sure you can do these things as you're writing down note to yourself be okay yes I can or I have to go back and watch this video or I have to practice this here we go number one can you identify which country has a comparative advantage so do you if I gave you a country um can you do it for output questions and input questions if you don't know the difference watch my comp comperative Advantage hacks video where I talk about that and I do the quick and dirty and give you a trick for that also make sure you can do terms of trade the AP micro exam doesn't do compartive Advantage as much as macro you could see this on a free response and if it's a free response that ends up being like a large chunk of your score if you don't know anything about competitive Advantage so you want to make sure you feel comfortable at the very least you could understand you know absolute Advantage how to get comparative advantage and you know that that alone will give you half the questions and if you're trying to get a three then half the question questions are good calculate GDP and the GDP deflator make sure you can identify who's helped and hurt by inflation there's usually one question on this so lenders people who lend money are hurt people who borrow money when there's un unanticipated inflation are helped um use the shifters of Agate demand and agate Supply there'll be at least four qu four questions where just if you just know AG demand Supply and how the curves shift you get the right answer calculate and use the spending multiplier like we just did explain how the economy adjusts in the long run this is one of those Concepts you definitely need to know in the long run when there's a positive output Gap or a negative output Gap how does the economy adjust here is a trick I'm gonna help you out when there's a change in fiscal policy or monetary policy those are going to change Agate demand when there's a long run adjustment that's going to shift the short run aget Supply so it's a good way to remember that that concept fiscal policy is always trying to like squeeze the economy to make it better by shifting demand letting it do nothing just waiting it out waiting out a recession that's going to be a short run act Supply shifter because eventually wages are going to fall the economy will fix itself make sure you do bank balance sheets in the ultimate review packet I have exclusive video that covers bank balance sheets gives you tons of practice really the only way to do bank balance sheets is not to read about it it's to practice them so maybe if you need more help go do a release bank balance sheets question and say okay let's practice this idea of bank balance sheets remember this is idea there's there's assets and liabilities and then uh there's some sort of change that takes place like someone deposits money into the bank now the key to this remember this concept If I deposit money in the bank right and the money is in my pocket and I put money in then that money gets multiplied it's not going to get multiplied by the total amount that I gave them because that's already part of the money supply so if I gave a bank a $100 and they have to hold let's say 10% and Loan $90 out only the 90 is going to get multiplied not the full 100 but stay with me but if the Central Bank bought bonds from that bank so the Central Bank comes in buys a bond and gives the bank $100 all of that's going to be lent out because the bank's going loan all $100 out again I'll say it one more time if you take money in your pocket put it into a bank only the initial amount that gets loaned out is going to get multiplied if the Central Bank buys bonds puts money in that bank all of that money is going to get multiplied does that make sense if that's helpful say super helpful in the comments super helpful Mr Clifford super helpful okay next one is calculate and use the money multiplier feel really com comfortable with that concept uh make sure you know open market operations particularly on the free responses they they love open market operations buying and selling bonds one year they are tricky so be careful for this if you're trying to get a five one year they had a question where it said um if commercial Banks buy bonds so when you talk about buying bonds your teacher taught you buy big sell small so buy big if the if the Central Bank buys bonds that's going to increase the money supply but if commercial Banks buys bonds that means the central bank is selling them so there's one time they ask that and I I think it's a like it's really messing with kids Minds because the kids memorize you know buy bonds big money supply money supply big buy bonds but watch out for that make sure you read the questions carefully last things you got to do in the last couple units explain how exchange rate affects net exports that's one of those key relationships I said earlier and then categorize transactions for bank balance B bounce payments so if they said okay here's uh you know here's a transaction between two countries is it part of the current account or the capital and financial account that being said this is a document if you don't already have this it's free it's in the ultimate review packet it's like the first thing you download and it has uh a link to all my videos so if you get in there you know you're running out of time but if you're like okay I I get I got I'm gonna get a five I got this there one thing I don't really understand is you know comparative advantage boom click on the video it'll cover comparative advantage or whatever concept you need it's inside there that said what we're going to do now is let's do some shout outs oh I missed that one I got to watch out who's who's uh um shout out to Mrs Sherling the best AP macro teacher ever um you guys are coming in shout out time I you know what I appreciate I'm not going to lie to you I really appreciate how you're doing shout outs to teachers I think that's cool because you have a good relationship with your teacher I hope you're not like shout out to me tick me out I'm cool right you're you're shouting out to uh to teachers and I think that's that's pretty awesome and your teachers have worked hard I know some of you guys are teachers right now uh you're watching this video first of all I want you I want to thank you for sharing my videos with your students and um and interacting with my channel uh you guys are awesome hopefully I get a chance to meet you at one of my workshops um here in San Diego it's a blast you get to hang out to the beach come out to the coast get together we'll have a few laps all right that said uh right now let's do this we're gonna switch gears a little bit and instead of focusing just on uh big stuff we're g get down we're gonna get down to a little bit more of the details now what I don't want to do is this I don't want to bounce around because obviously you know if kid just really wants one unit they can watch this video later and they can bounce around on their own time so what I want to do is I want to bounce around and stay in or not bounce around and stay in individual units just for the time being and I can answer you other questions so in unit one here are those key Concepts that you need to know what questions do you have about when you look at this um you know good oldfashioned demand and Supply they'll they've never had it on a free response like draw a market for supply and demand what happens if you know whatever happens in the market it's always aggregate demand Supply so really when you learn supply and demand to start off the course in unit one that was to get you ready for agage demand and Supply so there's not that many questions on that unit one really does two things production possibilities curve and comparative advantage that's it and inside comparative advantage you gotta know those terms of trade so a bunch of people are saying terms of trade terms of trade terms of trade terms of trade someone's asked about exchange rates I'll do that in unit six I promise so terms of trade the concept is easy like you know the concept the concept is you know two different countries produce different things and they have the same resources and then they can trade like if you can produce something lower opportunity cost to me then we'll trade and how they trade is called the terms of trade so two planes for one car would benefit both countries some numbers work some numb numbers don't work back in August I made a video that goes over that in detail and gives you a ton of practice for terms of trade so the one advice I can say is this because I can't I can't do a terms of trade question right now I did a bunch in other videos so you can watch those and the videos are faster than me talking right now but here's what advice I can tell you terms of trade won't be the entire free response it might be a multiple choice but if you don't know terms of trade it's not the end of the world it isn't uh you just if you don't know it whatever at this point um but it is one of those things if you're trying to get a four or a five then brush up on it don't whatever you do don't spend all your time doing compared Advantage when you really don't even understand monetary policy you're going to get yourself in trouble there's like four questions on monetary policy may like and and potentially the free responses and then like one or two questions over uh on um comparative advantage so don't don't waste your time with that all right next questions there are a few of them coming in um like you know you still shouting out um tradeoffs versus opportunity cost sorry you guys how did I even slow this down um how about this question this is a good one inputs versus outputs for comparative advantage well Parker um okay when you see a question and it says and I don't have any samples here but when you see a question and it says um country a and Country B are producing two products and they have the same resources that's an output question the numbers they giving you are products produced for an input question what you'll see is that say okay two countries take different amounts of time or different amounts of Labor to produce the same amount of products so we're producing one plane or one car one country takes 10 hours one country takes two hours to produce that car so in this case inputs is what they give you the numbers the numbers you read on there are hours they're not number of cars they're number of hours to produce one car so input questions are ones they give you inputs right hours number of workers number of machines that kind of stuff and output questions are one where they give you numbers the actual products they're producing that's how you know the difference between them there's also some tricks if you watch the hacks video input other goes under uh output other goes over those are some tricks to help you get the right answer I'd watch that video if you're honestly if you're like I feel good about compar Advantage I think watch that video one more time because it it is it helps with some practice and it also I'm I'm talking about my my you know comparative advantage hacks video it's it's probably the best video I've made when it comes to this stuff okay I do not want to put some of these comments on here you guys are crazy right crazy crazy okay um someone said absolute Advantage double shifts absolute Advantage is who can produce more right if two countries can produce one one country can produce 10 boats other one can produce 20 boats the one that can produce 20 boats has an absolute Advantage comparative depends on how relative they can compare it to producing other things the other one here about double shifts that's just that's just two shifts uh you know demand goes up and Supply goes up the same time what happens on the graph draw it on the graph remember something's going to be indeterminate either the price or the quantity of indeterminate is a double shift shout out to Mr Wallace okay all right what we're going to do is this we're going to move on I think we covered most of those things someone said trade-offs and opportunity costs um tradeoffs opportunity costs it's really nothing big it's just tradeoffs are all your options right right now you could be watching just random videos by dude perfect or some other YouTuber teaching economics or you could be sleeping you can be all these things that are all your trade-offs there's endless tradeoffs opportunity cost is the one best thing for example if this video just cut out like it turned off what would you be doing well that's the thing you're giving up right now that's opportunity C again that's not something you'll see it's more of a micro concept anyways so you're gonna be fine okay that said let's jump into unit two unit two feels very much like social science um you don't see very many graphs in fact you don't see any except for the business cycle and there's a lot of definitions what's GDP what's counted what's not counted most of those questions you'll see about counting GDP are really simple right they'll just say okay is it used textbook counted no because it's used right uh stocks and bonds don't count like if people buy stocks doesn't count GDP so remember just that General concept um you know I'm guarantee in the comment section everyone's saying like what about the uh the income approach the income approach or value added approach they don't ask very often about it but basically if you're trying to calculate how much spending takes place in the economy how much how much creation not spending but creation economic activity is taking place there's two ways to measure it right if I buy something some new product from you here's the money thank you for the product if I do that then you can calculate the spending or you can calculate the income so I can spend money here's the money thank you for the product you just gave me appreciate it count that that's the expenditures approach if they count the money that you earned from selling me the product that's the income approach there's also the value added approach where if you're a producer you know you bought some raw material and you added you know a dollar of value to this by doing something with it then that's you can add all that up as well the person who sold you the raw material gets a certain amount amount that you added to it the next person adds to that it they've never really asked a value added question um much so I've never really seen it so I don't really teach much of it at all uh the limitations of GDP I kind of mentioned that make sure you know you know household production doesn't count if you produce something at your house by yourself if you you know if you're an accountant and you help uh you know you do your own taxes that doesn't count on GDP or if you're a plumber and you do your own Plumbing that doesn't count on GDP unless you charge yourself unemployment like I said frictional structural cyclical that's the easy part you want you need to know the natural rate natural unemployment includes frictional and stral frictional and structural unemployment when there's no cyclical unemployment is the natural rate of unemployment a huge concept they're going to ask a lot about um for CPI you got to practice go get that practice uh equation sheet uh for understanding the idea understand the general idea of CPI though uh is important um people are asking some other questions I'm sure it's because I already went over it people ask about crowding out we're not there yet we're not there yet um you guys are so funny dude disinflation yeah yeah disinflation sorry you guys are just it's it's so fast it's it's so fast I can't I can't so people are asking about types of unemployment I just covered them they're easy you got to know them um the disinflation and deflation so deflation is prices are falling so during the Great rep Great Recession prices are going down um that's deflation disinflation means inflation is slowing at a slowing the rate of inflation is falling so prices go up 10% they go up 20% they go 30% then they go up only 10% and then go up only 5% then that means prices are still going up there's still inflation but it's slowing down their rate of inflation is falling that's disinflation they don't ask that many questions about it but it's it's there the last thing uh on here is this idea of um the business cycle just a graph it shows you where the economy is it's the first time you're introduced the economy goes up and down over time you can only have the economy in three places negative output Gap full employment or positive output Gap easy Concepts you got it people are asking questions we're not here only the ones on the screen please um um you know what someone asked this is you want I know you want a five CPI bias um that's this idea that you know when when price go up the assumption is that wow everyone's paying these higher prices but you also like buy less of that stuff right so for example if the price of beef goes up and the price of chicken goes up and so the price goes up for these things you might think oh wow price is quadrupled for beef wow that's inflation but people are going to stop buying it and they'll buy something else they'll eat more salad or whatever and so if they do that then people aren't actually paying those higher prices it's just an example of how CPI doesn't fully measure everything in the economy it might over estimate inflation they don't again Ask mer questions about it it's interesting it's cool but that's the idea that it's also the idea like substitution bi bias okay all right I'm moving out of this unit again this is a very uh relatively easy unit the concepts here are more definition questions this though wo unit three is where it all is Agri demand Supply the spending multipliers long run adjustments fiscal policy holy crap so many Concepts in this unit and you know them all at least I hope hope you do let's see if you do what questions do you have looking for your questions let me see them all right so the tax multiplier formula is the marginal propensity to consume over the marginal propensity to save now you're not going to write that down because you're not paying attention to the details of this but what you do need to know is this it's one less than the spending multiplier so if the spending multiplier for example the earlier question we did the marginal preny to save was 0.25 so the spending multiplier was four so about 20 minutes ago the spending multiplier was four that's the spending multiplier if this was a tax multiplier if we were cutting taxes right then the multiplier wouldn't be four it would be three it's always one less than the spending multiplier and that multiplier always is negative because we're talking about cutting taxes right so you can cut taxes people save a portion of tax cut spend the rest the amount they spend is always one less multiplier than the spending multiplier great question you know people are asking fiscal policy when you say fiscal policy do you really not know fiscal policy or do you want like more details because the concept of fiscal policy is easy there are two things the C the government can do to speed up the economy or slow down the economy increase government spending and cut taxes want speed up the economy increase government spending and cut taxes technically you can also put in transfers in this right you can the idea of you know a transfer payment where the government gives money to poor people or whatever that's that doesn't count in GDP directly until people spend it so that's actually an interesting thought if you think about it when your government gives a social security check to your grandma that money does not count in GDP right it's like hey Grandma here's $300 great that doesn't count in GDP because it's not government spending it's called a transfer payment anytime the government basically gives money for not for a product right so if the government buys I don't know if the government buys a tank that counts in GDP but if they're giving money to Grandma they're not getting anything from your grandma so that doesn't count towards GDP so give the money to her that's a transfer payment but when your grandma spends that money or a portion of that money then that becomes part of GDP so that's this idea of the transfer payment multiplier which is the same as the tax multiplier so that's the main concept on that one economies a scale is is microeconomics dude sorry um all right so um let's keep looking at some of these things that you need to know I think I covered multipliers pretty good earlier the long run a supply shifting or the long run Supply is important right I I mentioned this in my other video why it's vertical it's one of those things you don't necessar need to know why it's vertical you need to know that it's vertical at the Full Employment output and what's called the natural rate of unemployment this is where the economy will be in the long run that curve can shift you learned that in unit five about the idea of economic growth right but really in unit three you're just introduce this long Supply and you leave it there if the economy has a recession eventually wages will adjust prices will go down and we'll be back in the long run if the economy has an inflationary Gap eventually wages will go up price level will go up and agate Supply will shift and we'll back in the long run that's called a long run self- adjustment um the other Concepts you need to know here the automatic stabilizers are like one question and it's an easy idea right our our tax system is an example of an automatic stabilizer when there's a recession people drop their tax brackets like you make less income so you're paying less taxes automatically no new law required really for that all you need to understand is this discretionary fiscal policy Congress can like make a new law it's up to their discretion non-discretionary or automatic stabilizers the laws already on the books it's automatically going to move the economy counter um counter to what's ever happening if there's a recession it'll cause the economy to go up if the economy has inflation it'll cause the economy to kind of slow down um somebody asked me why wages are sticky or sticky wages again um the idea of sticky wages you know this is this is a KES I don't know if you learned much about him in your class but this is the idea that you know agur demand when it falls wages don't fall very quickly in fact the AP test question will say if they ask about long run adjustments they'll say something like assume wages are flexible what'll happen in the long run if there's a recessionary gap and the answer is in the long run eventually over time wages will fall as wages fall Agate Supply would shift to the right and unemployment would fall output would be full employment output the economy would self-correct those are the big Concepts here um someone says stagflation actually talk about stagflation I mentioned it earlier um you asking them good questions like people are saying time lags you know stagflation stagflation is was just a shift in a supply to the left higher price level um less output more unemployment um yeah those are those are kind of the concepts I think I covered most of these okay it's time to move on unit four was equally difficult as unit three this is introducing the idea of money what it is what it isn't the monetary policy um the idea of bank balance sheets probably the trickiest thing in here and then probably loanable funds class students were like what's this other graph like you learned AG man Supply I get it oh okay I I get monetary policy and the money market graph but then all a sudden loanable funds probably threw you off a little bit um I made a video that talked about loanable funds last year looked at one it's actually really good it covers it really well I use the movie up to kind of explain loanable funds um as questions are coming in what shifts the money demand curve great question let's out talk about that the demand for money is downward sloping and we talk about money we're not talking about just cash we're talking about all the money in your checking account right now you have a certain money in your checking account like as we speak right why is that money there well because it depends on the opportunity cost of holding money if you have money in your check let's say you have a million dollars in your checking account right now your opportunity cost is pretty darn High you could be putting that money in stocks or bonds or real estate you could be earning more money from that right you could buy buy bonds and you could get you know a 5% return on on that instead of having it sitting your check account not doing anything so there's an inverse relationship between the interest rate and the quantity of money people Demand right so if the interest rate's really high I do not want very much money in my checking account interest rates are low yeah might as well keep all my money in checking account who cares I'm only earning 1% by buying a bond so demand is down and sloping that's the first thing you need to know second thing is it shifts for anything that you need money for right so um if uh the the uh when online banking became a thing right an increase in online banking and access to your bank right you didn't need to go to the bank you can transfer funds over around you didn't need a bunch of cash you know what I'm saying um so really they don't ask questions about it the biggest one you're going to see if you're writing note to yourself is inflation inflation's a big shifter of money demand if price level goes up then you need more money to buy stuff right so if prices double then you need to increase the amount of demand for money you have it doesn't matter about the interest rate you're like I need money to go buy things it's called transaction demand so the biggest shifter you'll see on the test is change in inflation now one thing you need to say I need to say that I did not talk about and I'll actually change uh what I what you see here so you're actually pay attention to me pay attention one of the key relationships that I did not put on the screen earlier I don't think it was on there is the relationship between interest rates and bond prices they started asking this question about three years ago actually a little more than that but they keep asking it over and over again and all they ask is a relationship question right what happens to this to this all you gotta remember is this they're inversely related when interest rates go up bond prices fall or when interest rates go down bond prices go up if you memorize that you're good that's all I need to know for most multiple choice questions there's been one year they had students explain why but that was a free response wasn't that big of a deal if you don't know why you're still you still get a five it doesn't matter but for our purposes just understand that there's an inverse relationship let me explain really quickly when interest rates are higher and I can go get a new Bond at a higher interest rate then I don't want an old bond that was previously issued at a lower interest rate so if I can go buy a new Bond and get 10% I don't want to go buy a bond that only earns 3% that was issued five years ago and so the price of those previously issued bonds would fall so interest rates go up bond prices go down and it's inverse relationship there it is um someone's asking about M1 M2 actually John is spamming uh and and wants to know M1 M2 so really yes in the past there were a few questions that talked about it um I haven't seen it in a while the concept in real life recently changed the Central Bank actually changed what counts as M1 M2 the most important thing you know is this is cash currency money in your pocket that's part of uh M1 right M1 includes that includes money in your checking account and it includes money in your savings account up to a certain amount I don't remember the dollar amount but at checking account it counts uh when we talk about money remember we're talking about you know things you can spend to buy things right your your Xbox is not an example of money it's an asset but not money so this is cash this is your money in your checking account and some money in your savings account and then uh two is like cdes and travelers checks and some other weird things that don't really get used as much I mean CDs get used a lot but you get the idea um I haven't seen a question on it in a long time so it's not something that matters much um some people are asking about velocity of money good I forgot to mention it thank you for asking the velocity of money is um is I mentioned it earlier how much money get your dollar gets spent and resent over time um and really the the velocity of money it it's just an idea you're actually usually see in unit five when you learn um the quantity theory of money but basically you know if you go to a garage sale right and you go buy something in the garage sale for $20 then you go back to your house and you're selling your stuff and someone spends $20 on your thing you take it and go buy at a different house buy something for $20 that money got spent multiple different times that's the velocity of money you can actually calculate the velocity of money that's what that concept is okay that said um someone asked about bank balance sheetss um I really can't do bank balance sheets here because I need practice questions so you have to get on the best way to learn the best way to learn practice sheets practice sheets the best way to learn bank balance sheets and comparative advantage is to practice them and GDP deflator it's just things you just got to sit down and practice I could talk about all day like bank balance sheet is this doesn't help you got to sit down look at a question see if you got it right you get it wrong try another one try another one try another one then eventually like oh and you'll start seeing like those Concepts all right I think I got most of your questions done um the one that I didn't do is ample and limited reserves again I made the video yesterday watch that one I talk about blood and how you know money is like blood um it's a pretty good analogy I think um though but I know by the way if you watch the video I know anemic means your body isn't making iron but it's like bad blood you know what I'm saying same idea don't worry about it my wife is like that's not what anemic anyways um federal funds rate let's do that real quick okay here's here's a definition concept so so someone ask what's the federal funds rate okay you're a bank okay let's just say you're a bank you need some money right right let's say let's say a bunch of people showed up uh and they say hey we need our money out and you're like oh crap I need some money to cover you know my my reserves over the weekend so where do you get money well there's two different places you can go you can go first to another bank right you go to another bank go across the street go to Wells Far Fargo and say hey excuse me can I borrow some money overnight loan and they can you have to pay some interest for it and you can borrow some money that is called the federal funds rate federal funds rate is the rate that Banks charge each other for overnight loans or if you want to you can go to the central bank right the banker Bank you can go to Central Bank and say hey Central Bank uh can I please have some money they'll charge your interest rate the rate they charge is called the discount rate horrible names it's be the opposite like they're totally misnamed federal funds rate is the rate that Banks charge each other the discount rate is what the Central Bank charge es commercial Banks now if you're a bank you can also now if you want to borrow money if you want to lend money right if you want to earn interest you can either lend it out to another bank right and earn some money off it or right you can lend that money to the Federal Reserve you can you can put that in reserves and that's the rate they're getting is called the interest on reserves that's this New Concept that's happening it's been happening for seven years the econom but the idea of interest on reserves has it been seven years maybe three interest on reserves is what the so if you're a bank and you put money and in reserves with a central bank they'll pay you interest so you're making money by doing nothing just having them hold your money right that's interest on reserves and that's an administered rate that the central bank can control they can give 1% they can give 5% they can change whatever they want and changing that is how they do monetary policy when there's ample reserves I'm saying that I'm saying that because I'm fearful that students start freaking out like I don't know that I don't know I wasn't taught that not the big if just watch my other video I made yesterday you'll be fine ample Lim reserves it's an easy concept I'm Gonna Keep moving uh yes you can use a calculator it's a for function calculator you can do that it's not a big deal open market operations when the Central Bank buys and sells bonds hopefully I covered some of your questions let's go move on to unit five unit five unit five was basically um what happens when everything you already learned takes place like you learn fiscal policy and monetary policy this unit's like okay what happens in the economy because what are the what are the downsides of some of these things the long run consequences upsides and downsides so the first part it talks about you know fiscal and monetary policy then the Phillips curve is the key graph here make sure you can spot and know showing a negative output Gap positive output Gap all that stuff um there is a quantity theory of money I mentioned earlier you should also know the general idea of the long run neutrality of money which means in increase in the money supply in the long run will have no effect in the economy the example you get best example Milton Freeman example is if you know you're have an isolated city in the world and you there's no other cities and you go dump a big pile out of a helicopter of money in that city right it feels like a there's more money but they're not going to get more output there's factories are still the same the number of workers is still the same all you're going to get is higher prices and that's it no more output so what we've been talking about with monetary policy in the previous unit when they increase when the Central Bank increases the money supply that lowers interest rates and yes in the short run that leads to more spending right more borrowing more spending but if that leads to higher prices then in the long run the economy goes back to where it was before and we end up with no additional output so the idea is basically you can't and and and countries have tried this you can't print money to have a healthy economy it's impossible you can't just keep putting money out there and expecting growth because there is no growth because growth depends on how much machines tools and factories you have not how much money is out there that makes sense um now that being said yes when the monetary policy takes place and businesses take that money to make more machines and to to borrow money to buy factories yes that can lead to more growth in the long run but if if they don't do that you just increase in money supply and Banks don't or I'm sorry individual companies don't uh increase investment then that means no actual growth in the long run that's called the right there the number five long run neutrality of money deficits in debt not a big deal super easy don't even need to cover it crowding out I mentioned earlier the idea that when the government deficit spends it borrows money leaving less money for the private sector which Le the higher interest rates just remember this crowding out means higher real interest rates say it with me crowding out means higher real interest rates and slowing down of the economy the last thing here that you need to know is the idea of economic growth and the idea that the economy can actually shift to the right this was earlier when I talked about the longer act Supply that vertical curve it can shift rightward if we have more human capital more more machines more Capital stock any of that stuff could cause more economic growth all right last unit the one you're probably least comfortable with which is good if if you're gonna be least comfortable with a unit it's this one because it's the shortest unit it has the least Concepts to learn and practice so bank balance or balance of payment has two accounts this is just a concept just understand the concept it's transactions um I'm trying to I want to make a video that gives analogy so I'll try it with you guys let me know if it's actually helpful in the comments W I'm swinging around here yay so um first of all let's back up people assume that having uh you know you have a a a trade deficit is a bad thing right it's it makes sense like from like a you know from like a arms distance without thinking about how economics works you think like you know in unit one you learn about compar advantage and how some countries are better at producing other things and you should trade with those countries in unit six you talk about balance payments and people go oh no no it's bad you shouldn't trade with other countries you want to make sure that you know we spend $100 on their stuff and they spend $100 on our stuff that doesn't make any sense and the perfect example that economists always give is your local grocery store you have a huge trade deficit with your grocery store you are buying way more stuff from them than they're buying from you but you're totally fine with that if you didn't then you'd have to make all that food yourself right so it's good to have a trade not it's not good it's just it is to have a trade deficit if they have a lower opportunity cost and you and they have a compartive Advantage then go buy stuff from other countries now this economists all agree on this is not a political thing this is an economics thing so it's not necessarily a bad thing to have um a trade deficit with another country now the analogy I want to use using that grocery store I want to make a video that talks about this is the transactions you make with the grocery store right would fall into two different categories the current account and the capital and financial account the current account is your standard ones like when you go to the grocery store you go buy cookies right you give them money you walk away there's no more there's no other deal taking place that was it you know what I'm saying that's the current account it's your standard buying goods and services from the country that's the current account the other one the capital and financial account would be if your local GR gr store was selling bonds right so when you walk in you go in and you go buy bonds and you're going to be expected to make some money off it a good example but it's not the same concept as like buying um I I maybe uh buying gift cards like you're you're gonna expect more money from them there's more to this transaction so we'll do bonds you go to your let's say you walk in your grocery store you're not buying a thing you're buying a bond you're saying hey can I have a bond thank you and they give it to you and they're going to keep paying you money BAS based on your bond you're going to get interest from that it's a continuous transaction that's the capital and financial account by the way ises that analogy even make sense if it does let me know it makes sense in the comments I I I want to make a video that explains it I think the best way to explain this this stuff in the most cases is just to simplify it like my limited ample reserves like blood in your system is like banking system it makes sense does it make sense let me know does it make sense no it does not make sense screen I'm not sure if people can see me oh there's the screen sorry I see what you're saying okay okay so um super helpful pizza man okay I'll take it I'll take it shout out to Mrs Weaver um so back into this unit six let me make this a little bigger so you can see that's the first part of this of this unit this idea of balance of payments these two accounts the current account and the Capital Financial account the other part it looks like there's a lot 6.2 through 6.6 all this other stuff is whoa that's foreign exchange it's not it's literally one graph supply and demand for currency and a bunch of shifters and so really uh six uh 62 and 63 are introduced in the graph 64 and 65 and 66 are just talking about the shifters of that graph you already know shifters the ones you need to know the main ones you need to know there's four shifters of Foreign Exchange price level income um taste and preferences and interest rates that last one's the most important one here's a relationship for you just remember this higher real interest rates will increase the demand for a country's currency if a currency has a higher rate of return to to borrowers then more people want their currency so higher interest rates causes a currency to appreciate lower interest rates cause it to depreciate if you remember that you're going to be fine that's the idea of capital inflows right that actually that's the idea someone just said capital inflows so if interest rates go up there's going to be more capital inflow other countries are going to put more money into your economy inflows coming in and you'll end up with a capital and financial account Surplus or you'll move towards a surplus more money is going to that capital and financial account which makes sense in our analogy oh I think I got this so for example you go oh this is good this is good this is good okay stay with me stay with me stay with me this is how this is actually how I develop videos in the first place you're just watching it live okay you go to your grocery store you normally buy cookies all right you buy cookies and you leave that's part of the current account cool and you look every once a while they sell bonds but the bonds are like 1% like I don't need to buy bonds at 1 percent I can get my own country for 5 percent whatever who cares I'm not gonna go buy a bond from my local grocery store you keep buying things in the current account okay so you have a surplus in the current account okay cool awesome great what happens now well let's say now that interest rate that they're offering at your local grocery store goes up to 20% you're like whoa woo I want that higher rate of return I can get a higher return than in my own country you go start buying that so that's causing the for the that's the part that's tricky I guess but for the grocery store the capital and financial account is going to move towards the Surplus you're spending more on buying assets from them buying stocks and bonds buying assets from them and you're buying less of the other one right you're buying less of the current account cookies if that makes sense it's not a very good analogy but the idea is the concept of inflows and outflows inflows and outflows of financial account or financial assets is basically you know if I buy a country's bonds then inflow is going towards them and there's more outflow coming out of my country I don't know if that helps but I just kind of I'll work on it that's my videos very helpful analogy Oliver I'm gonna put you on the screen just for saying that it makes me feel good about myself and you disappeared dang it you guys are too fast Oliver thank you I saw that you said very good analogy I don't know if you're being sarcastic but I really do appreciate it you're awesome okay this is unit six um this is not a hard unit because there's very few things but it's the last unit that you need to learn and so that's that okay ladies and gentlemen we have just hit the hour and 16 minutes Mark and we're winding down the reason why is there's other videos that uh you can watch that'll help you at this stage at this stage um you're you know reviewing you're thinking about it don't try to learn everything that's one advice unless you're trying to get a five then you should be looking up like The Reserve Market or bank balance sheets or I'm can go back and do terms of trade if you're trying to get a five cool that's awesome if you're just trying to get a three Now's the Time to do some practice questions and just like like weed out those easy questions you should be getting right being like Oh I should have got that oh yeah yeah yeah okay yeah or I forgot that equation one of the things I suggest some strategies for tomorrow right before you walk in the exam number one if you're having a hard time with the grass and there's not that many of them like draw them out ahead of time and have them on a piece of paper walk in with a piece of paper and as you're you're all right now everyone put down your paper you're like going like this oh okay you go put it down run in there and the second they give you pencil draw it on the table or Draw It on the back of the exam sheet but have those graphs there's only six of them but have those graphs drawn if you're having a hard time with those graphs um maybe even the equations like write down those equations if you've totally forgot them um the reality is though this is not that hard of a test as as long as you know those four things know those definitions okay know those graphs know those relationships and know those equations you'll be fine guys it has been my pleasure I mean this it has been my pleasure to help you uh this entire year uh it's been my pleasure to be your kind of online teacher I love my job and I love economics um you're not my students because you're all out there here I can see you doing shout outs to your teachers um you know the right sorry shout let's do some shout out time because we're uh we're winding down but um you know I'm not your I'm not your I don't know you right this is the the weirdness of of Technology but I kind of do know you and if I ever see you on the street and you ever see me you better come up and say hi it' be super fun to see you and meet me at some point if you're ever here in San Diego it' be cool uh to see you and you teachers make sure please sign up for one of my workshops and I get to meet you in person that is my favorite thing um am about to cry hope you're not crying because the the content um and if you are going to cry I'm going to cry too I'm gonna cry too because this has been hard you've worked super hard you've gotten to you know college is gonna be even harder but you've had a chance to push yourself and learn something and you're gonna have this amazing feeling uh tomorrow you're gonna have this amazing feeling uh when you're done with the test and they say all right put your pencils down and you'll be like you know what I got this dude I got this and you're gonna say I'm ready for college for you seniors and you be like you know what I can do hard things in life because this was a hard class and I'm super proud of you for all the time and effort you put in I'm super proud of all your teachers for the time they put in make sure to say thank you walk up and give them a handshake and say Hey thank you I really appreciate you help me get this college credit um it has been my pleasure this is the last time you're going to hear these words from me and you know what words I'm gonna say too right um the words I'm gonna say are these and again it's the last time if you didn't already subscribed make sure to subscribe scribe come back and watch my Ecom movies and other videos but uh here it is last thing I'm going to say to you guys is thanks for watching until next time